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Buzz Bits: Dow and Nasdaq Surge Up


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Bernanke Bullet - Jeffrey Cooper - 1:28 PM

So, the Bernanke Bullet coldcocks Boo and puts Hoofy back into the ring at least. It remains to be seen if Hoofy can keep his dukes up and for how long. Can he keep his gloves laced up until the month end bell rings? Perhaps he will just stagger around the ring biding his time, but Boo has drawn blood. There is a gash over Hoofy's eye and we'll have to see if he can even aim a punch or whether he will just be swinging wildly.

As Jeff Macke said it was no accident that Bernanke fired his Bullet prior to the open rather than a half hour before the close. It was by design to do the most damage. We're not playing with choir boys here. The timing was surgical. The options players had no choice but to move as the instruments expire at the open. Consequently, the Man insures a boomer of a move, rather than have to depend on 'natural' buying on their move. It would have been embarrassing if there was a limp one after the discount rate cut. So they used a splint for insurance---a TIMING splint. Noice. A lotta folks with short calls were nailed. That's one reason for the large gaporamas in many names.

Does this set up the Bernanke Bullet mentality where Boo chews his claws over the idea that the Lone Ranger could take target practice at any time OR does the massive short covering serve to weaken a damaged market further?

This was a structural move. But it seems to me that there remain serious fundamental, structural, derivative, financial and ultimately economic issues to contend with. Hey, but nice pistol whip Ben.

Smokey The Fed Chief - Adam Warner - 12:26 PM

Can't agree more with what that Macke guy just said on TV. The timing of this move has an awful lot to do with options expiration and the particular circumstances surrounding August '07.

Early 2001 was a somewhat similar time in the market to now, just in tech as opposed to financials. The shaky ones were imploding, and even the "safe" ones were getting hit with the ugly stick. The market was getting a little better around April Expiration. And then Intel (INTC) reported and blew the doors off estimates. The stock was up around 20% and it was carrying the QQQQ's with it.

About mid-morning, Sir Alan chimed in with a surprise rate cut, and with some added options fuel the market veritably soared. You can see it on the chart here covering from Dec 2000 through April 2001: It's the large up day with the big volume in mid-April.

Click here to enlarge.

I remember at the time thinking the Fed had to be very aware of how the particular timing of that move would goose it further than normal. Which of course leads me to assume the timing of today's move had similar thinking behind it. The explosive volatility was like the dry kindling wood, and Big Ben knew exactly when to throw that match.

The "surprise" moves in 2001 provided some big intraday bumps (there was one in early January also), but futher out it didn't really do much. In fact the QQQQ's made an incremental higher move later in the month, then never got back there again until this year. This all really does help keep a bid under options volatility, no question.

Randoms - Fil Zucchi - 11:53 AM

  • I am not even back to my desk, and the Minx has already decided to remind me who's in charge by keeping faves Cypress (CY) and Citrix (CTXS) in the red despite this morning's eruption.

  • Amgen (AMGN) continues its drip lower and I continue to roll down my puts. The price action has not changed my thinking on this one. (See my May 11 Buzz for details.)

  • I resisted the temptation to dump a whole lot of stuff on the open, which obviously would have been a good idea - unless, that is, the market had added another 200 points, in which case it would have been a very bad idea. Which is a long way of saying that if you have no idea what's happening, stick with what you've got.

  • Homies (XHB) in Red Dye. Has anyone heard from Bob Toll lately? What happened to the "demographics" argument? What about prices on par with Europe? There will likely be a long side trade there at some point... from somewhere in the single digits?

  • My only bona-fide trade today has been a round of buys in gold names. Pretty obvious if you think that Boom-Boom's cash will do nothing but create inflation, but sometimes "obvious" is OK.

  • On the heels of Prof. Tatro's mention of FCStone (FCSX), the 60 strike leg of this position is now history and has been rolled down to the 35's strike.

  • I agree wholeheartedly with Toddo that a red close today would be devastating and that Boom Boom won't let it happen if he has to park himself in the middle of the Big Board and buy every share for sale. But even a plus double-digits close ought to be seen as a meaningful negative.

Position in FCSX, gold stocks, XHB, AMGN, CY and CTXS.

Hello Bear Stearns, So Long Beazer, it's getting cold there... in the freezer... - Todd Harrison - 10:36 AM

Eddie Mush swung by the 'Ville today and, before we pushed him in the closet, he proclaimed that the world was well and the tape was swell. Hey, he might be right--a broken clock is right twice a day--but I, for one, faded (read: sold) the opening to take a fresh look.

How fresh is that look? Somewhere beteween DJ Jazzy Jeff and the Prince. And this is what I'm seeing:

  • Bear Stearns, after the stunning 13% run yesterday, is back in Red Dye despite chatter of a China rescue.

  • I will say this--I believe the most likely solution--not for Bear, but in general--is a transfer of wealth to China and others through the accumulation of stateside assets. Hey, with the dollar off 33% since 2002, that's a heckuva sale!

  • When stocks are red in an otherwise green sea, it typically implies supply. Those names today include Juniper, Beazer, Amgen, IBM, CSX and GM.

  • Run, run, run for the mortgage. The quicker it opens, the sooner we'll gorge it.

  • Was the first fade the easy trade? Likely--and disicpline likely dictates appeasing the trading Gods by maken a token cover (sale of puts) just to stay true to the process.

  • And put... the candle.. back!

No positions in stocks mentioned.

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